Ending the Ethanol Debacle

After providing billions of dollars in ethanol subsidies over 30 years, federal lawmakers decided to halt the gravy train on December 31, 2011. It’s about time! The tax credit cost U.S. taxpayers $6 billion in 2011 alone. Congress ended the $.45/gallon blender’s tax credit and dropped the $.54/gallon tariff on ethanol imports. However, policy makers kept the Renewable Fuel Standard (RFS) , which mandates the use of bio-fuels, including ethanol.   

Currently, 40% of the U.S. corn crop is used to produce ethanol, up from 5%-6% six years ago. The increased demand created by ethanol has pushed the corn price from $2-$3/bushel to $6-$7/bushel. This price hike is good for grain farmers, but devastating for livestock farmers and food consumers. In 2011, dairy farmers faced the highest feed costs in history and more corn was used to produce ethanol than cattle feed.

Cows at our farm eating
Ethanol was touted as the answer to ending U.S. reliance on foreign oil. I’m curious why the U.S. is exporting millions of gallons of ethanol annually. Should the resources of this country, including taxpayer dollars, be spent to produce ethanol for foreign countries?

I’ve read several articles and readers comments over the last few weeks and found that I’m not the only opponent of U.S. ethanol policy.

“Ethanol is the only industry that benefits from such a triple crown of government intervention: its use is mandated by law, oil companies are paid by the federal government to use it and it is protected by tariffs. The costs of ethanol subsidies and tariffs far outweigh the benefits.” U.S. Senator Diane Feinstein (D-CA).

“The increasing demand for corn for ethanol production has contributed to higher corn prices. Which has created additional income for corn producers but also appears to have increased costs to meat and poultry producers, big food companies, grocery shoppers and federal food programs.” The Government Accountability Office

See my earlier blog Al Gore Confirms what Dairy Farmers Know - U.S. Corn Ethanol is Not Good Policy.    

It seems the support for U.S. ethanol policy and subsidies has diminished greatly over the last few years. The few backers appear to be grain farmers, companies who sell products and services to grain farmers, the corn industry, ethanol processors and the Congressman and Senators who voted for it – all who reap financial gain.

My family dairy farm is competing with well-funded and heavily subsidized ethanol plants to purchase corn to feed our cows. Dairy, livestock and poultry farmers are disadvantaged because we can’t compete. The high price of corn has driven up the price of soybeans, hay and other feedstuffs. As a result, many farms have suffered financially and some have gone out of business. I wonder if Congress considered how ethanol policy would impact livestock and poultry farmers?

I do all the grocery shopping for our family and see the increased price of many food items. Ethanol has contributed to the escalating cost of human food as well. It’s not the only cause, but has played a significant role. Did Congress think about how ethanol policy would affect food prices?

This graph illustrates the uses of U.S. corn from 2001 to 2011. Exports have been consistent and corn used for feed has decreased. The glaring change over the last 10 years is the increase in corn used for fuel/ethanol.

The government should eliminate ALL ethanol mandates too. If ethanol is such a great product, certainly it should be able to stand on its own.